About Pick of the Day

Every day, I will try to find what I believe is the best looking short term currency trade setup for the upcoming trading day or week. If you're a forex newbie, it can be tricky trying to figure out how to look at charts and draw lines. My goal is help you understand the psychology behind price movements in the foreign exchange markets, so you can learn to analyze your own currency charts and trade on your very own. I will post my ideas and/or reviews through out each session right here, on Twitter and on Facebook.

Trade Idea: CHF/JPY Long-Term Selloff

Yen bulls are still charging even after the BOJ announced some policy changes so I’m going with the flow on this CHF/JPY downtrend. By the looks of it, market watchers aren’t sold on the idea of the BOJ’s yield curve targeting measures, allowing yen bears to unwind their short positions.

CHF/JPY Trade Idea

Now this CHF/JPY downtrend has been going on for quite some time since this descending trend line is also visible if you zoom out to the daily time frame. Price made higher lows since June so it appeared as though the pair was setting up for an upside breakout, but the short-term rising trend line eventually gave way.

CHF/JPY 4-hour Forex Chart

I decided to hop in at market on a break of this support zone then set my stop past the trend line and 107.00 handle to give myself room to cut in case an upside breakout does happen. But with bearish momentum looking strong, I’m hoping to press my advantage with another short position on a break of the 102.50 minor psychological support level then trail my stop to entry.

The SNB didn’t sound too dovish in its latest policy statement but, well, it’s the SNB and they’re more likely to announce something that’s bearish for the franc than prop the currency up. For now, I’ll take advantage of this return in yen strength, especially since the hawkish FOMC statement could keep risk aversion in play, which is good for the lower-yielding Japanese currency.

Here’s what I got:

Short CHF/JPY at market (103.40) for 0.50% risk, another short order at 102.50 for 0.25% risk, stop loss at 107.25, and initial profit target at 100.25 for a total R:R of 1.22-to-1.

As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.

More from our Blogs

Let's end this week's intraday charts update by checking up on our old setups for USD/CHF and CAD/CHF. Of course, we'll be looking for fresh setups as well. In addition, I've also got a new channel pattern for GBP/NZD. ...